State Tax Day - Current, S.4, California—Corporate Income Tax: Sidewalk Safety Mat Manufacturer Not Entitled to Research Credit, (Sep 11, 2026)

A sidewalk safety mat manufacturing business was not entitled to tax refunds based on research and development tax credits it claimed on amended California returns for the 2019 and 2020 tax years. The business identified six projects (peel and stick, rapid cure time, wet-set, texture technique, guide strips, and pavers) for which it claimed to have incurred qualified research expenses. Qualified research, for purposes of the credit, had to satisfy four tests, one of which was the process of experimentation test. The business did not demonstrate that substantially all of its activities for any of the six projects for which it claimed the credit constituted elements of a process of experimentation for a qualified purpose. Further, because the criteria under the process of experimentation test were not met, the Office of Tax Appeals did not need to discuss whether the business qualified for the credit under any of the other tests for qualified research.

Safety Step TD, Inc., California Office of Tax Appeals, 2026-OTA-451, July 6, 2026 (released September 2026), ¶408-122